Estimated reading time: 2 min

The Financial Conduct Authority (FCA), which regulates financial services and markets in the UK, considers projects on the Collective to be high-risk investments due to potential for investment losses.

What are the key risks?

1. You could lose all the money you invest
   • If the project you invest in fails, you’re likely to lose 100% of the money you’ve invested.
   • Advertised rates of return aren’t guaranteed. This is not a savings account. If the project you invest in does not generate profits, you could earn less money than expected. A higher advertised rate of return means a higher risk of losing your money. If it looks too good to be true, it probably is.
   • While the Collective carries out due diligence on projects, we can’t guarantee the project will pay dividends and repay your investment. You should always do your own research before investing.
2. You won’t be able to access your money for a set length of time
   • You can’t sell your investment or get your money back before the end of the investment term.
   • Dividends aren’t guaranteed and might not be paid regularly.
3. You shouldn’t put all your eggs in one basket
   • Putting all your money into a single company or type of investment is risky. You should consider spreading your money across different investments so that you’re less dependent on one doing well.
   • A good rule of thumb is not to invest more than 10% of your money in high-risk investments.
4. You are unlikely to be protected if something goes wrong
   • You won’t be protected by the Financial Services Compensation Scheme (FSCS) if a project you invest in fails or performs worse than expected. See the FSCS investment protection checker for more info.
   • You also won’t be protected by the Financial Ombudsman Service (FOS) if a project you invest in fails or performs worse than expected. However, if you have a complaint about the Collective, FOS may be able to consider it. Learn more about FOS protection.

Resources to learn more

• The Collective’s full risk warning
• Five questions to ask yourself before you invest
• The FCA’s summary of investment-based crowdfunding